- 50:50 joint venture called
VodafoneZiggo Group Holding B.V. (“VodafoneZiggo” or the
"JV").
- Combining Ziggo’s fibre-rich broadband
network with Vodafone’s market-leading mobile operation creates a
stronger converged competitor in the Dutch market, delivering
significant benefits for consumers, businesses and the public
sector through investment in digital infrastructure and customer
experience.
- VodafoneZiggo has combined revenue of
over €4 billion with ten million fixed and five million mobile
Revenue Generating Units (RGUs)1 and the fastest-growing B2B
business in the market.
- Following the divestment of Vodafone’s
consumer fixed business “Vodafone Thuis”, the estimated net present
value of total synergies for the transaction remains around €3.5
billion.
- Following the recapitalisation of
VodafoneZiggo2 and after taking into account the €0.8 billion
equalisation payment by Vodafone, Liberty Global will receive €2.2
billion and Vodafone will receive €0.6 billion in cash payments
post-closing.
Mike Fries, CEO of Liberty Global, comments, “This joint venture
is great news for Dutch consumers and businesses. VodafoneZiggo
will be the most innovative provider of converged communications
services in the Netherlands with a full suite of market-leading TV,
broadband, fixed-line and mobile products on day one of the JV. We
are also excited for our shareholders. This is a highly accretive
transaction with significant synergies and a predictable dividend
stream. When including over €500 million of cash generated and
up-streamed since the announcement of the deal back in February,
total proceeds to Liberty will exceed €2.7 billion. We look forward
to deploying that capital to drive long-term growth and investor
returns.”
Vittorio Colao, Vodafone Group Chief Executive, said, “Today
marks the creation of a strong integrated communications provider
in the Netherlands, combining the complementary skills and
experience of Vodafone and Liberty to bring a range of benefits to
consumers, enterprises and the public sector. The merged operation
will be a stronger competitor in the Netherlands - one of our core
European markets - and is a further example of Vodafone’s
ability to create value for its customers and shareholders through
an effective market-by-market convergence strategy.”
New Dutch company to deliver converged consumer services and
create a leading B2B challenger
Liberty Global plc (NASDAQ: LBTYA, LBTYB and LBTYK) and Vodafone
Group Plc (LSE: VOD) today announced that Liberty Global Europe
Holding B.V. and Vodafone International Holdings B.V. have
completed the transaction to combine their Dutch operations to form
a 50:50 joint venture.
The JV will operate under both the Vodafone and Ziggo brands and
will create a nationwide integrated communications provider with
7.1 million homes passed by the fibre-rich broadband network of
Ziggo Group Holding B.V. (“Ziggo”) and the nationwide 4G mobile
coverage of Vodafone’s Dutch operation (“Vodafone Netherlands”).
VodafoneZiggo has nearly 15 million RGUs, of which 4.0 million are
video, 3.1 million are high-speed broadband, 2.5 million are
fixed-line telephony and 5.2 million are mobile. For the twelve
months ended September 30, 2016, the JV would have generated over
€4 billion of revenue3.
Financial information for Ziggo, Vodafone Netherlands including
Vodafone Thuis, and Vodafone Thuis (on a standalone basis) is
presented below for the twelve months ended September 30, 2016.
€m; September 30, 2016
Ziggo4
Vodafone Netherlands
VodafoneThuis
Revenue 2,446 Revenue 1,836 53 Segment OCF 1,341
EBITDA5
624 (29)
Estimated 2017
Shareholder Charges6
(97) Estimated Incremental 2017
Shareholder Charges6
(61) -
Segment OCF After Estimated
2017Shareholder Charges
1,244
EBITDA after Estimated Incremental
2017Shareholder Charges
564 - Property & Equipment Additions (517) Capital
Additions (327) (44)
By combining Ziggo’s market‐leading Horizon TV product suite,
including Replay TV, Ziggo Sport, 300 Mbps nationwide broadband
internet and an extensive Wi‐Fi network, together with Vodafone
Netherlands’ data‐rich 4G mobile propositions, Dutch consumers will
enjoy the highest quality customer experience both within and
outside the home. In addition, the JV creates a leading
national enterprise business through the combination of Vodafone
Netherlands’ extensive B2B expertise, product portfolio and
distribution footprint with Ziggo’s fast-growing B2B operation and
its high‐capacity nationwide cable network.
The new combined management team will rapidly bring to market
converged propositions for Dutch consumers, enterprises and the
public sector.
JV synergy update
The VodafoneZiggo JV is expected to generate significant
efficiencies. As a result of the sale of Vodafone Thuis, the cost
and capex run-rate savings targeted for 2021 have been reduced from
€280 million to approximately €210 million7. However, the sale
immediately improves the cash flow of the JV as Vodafone Thuis had
been generating negative cash flow (€73 million outflow in the 12
months ended September 2016 as shown in the table above). In
addition, expected integration costs will also be reduced from €350
million to €280 million as a result of the Vodafone Thuis
sale8.
Overall, including revenue synergies with a net present value of
at least €1 billion and after taking into account (i) the
elimination of expected losses that would have been incurred by
Vodafone Thuis and (ii) the reduction in integration costs, the
estimated net present value of total synergies for the transaction
remains approximately €3.5 billion.
Separately, and following a detailed review, the parties have
agreed to increase the scope of services to be provided by both
parent companies post completion to ensure that VodafoneZiggo will
benefit from the full scale and complementary expertise of each
partner. As a result of this increased scope as well as changes in
the assumed underlying activity levels, the estimated amount of the
agreed upon annual shareholder charges to the JV has increased from
the previously reported estimate of €182 million for calendar 2015
to an estimate of €211 million9 for calendar 2017.
Transaction payment details
In connection with the September 2016 recapitalisation of
VodafoneZiggo and the equalisation payment, Liberty Global will
receive approximately €2.2 billion in cash post-closing and
Vodafone will receive approximately €0.6 billion. These amounts are
based on (i) the €2.8 billion of net recapitalisation proceeds from
VodafoneZiggo, with each party receiving a 50% share, and (ii) an
equalisation payment from Vodafone to Liberty Global of €0.8
billion. In addition, both companies have retained the cash
generated by their respective Dutch operations from the February 15
signing date through December 31, 2016 (over €0.5 billion for Ziggo
and approximately €0.3 billion for Vodafone Netherlands), bringing
the total cash proceeds to over €2.7 billion for Liberty Global and
approximately €0.9 billion in net cash for Vodafone.
The equalisation payment to Liberty Global is lower than the
initially announced €1 billion amount due primarily to an increase
in Ziggo net debt from €7.3 billion on September 30, 2015 (the date
on which the €1 billion payment was based) to €7.7 billion10 of
Ziggo net debt as of December 31, 2016, prior to the post-closing
recapitalisation dividend payment. This higher debt balance
contributed to an increase in cash distributions from Ziggo to
Liberty Global during this period.
Following all post-closing payments, VodafoneZiggo will have
gross debt of €10 billion11. As previously disclosed, the JV will
distribute 100% of its available cash to both shareholders, subject
to a minimum operational cash balance, and is expected to undertake
periodic recapitalisations, subject to market and operating
conditions, to maintain its 4.5x-5.0x target leverage ratio.
Going forward, neither Vodafone nor Liberty Global will
consolidate VodafoneZiggo, which will be reported as an equity
affiliate or associate12 by both companies.
About Liberty Global
Liberty Global is the world’s largest international TV and
broadband company, with operations in more than 30 countries across
Europe, Latin America and the Caribbean. Liberty Global invests in
the infrastructure that empowers our customers to make the most of
the digital revolution. Liberty Global’s scale and commitment to
innovation enables us to develop market-leading products delivered
through next-generation networks that connect our 29 million
customers who subscribe to 60 million television, broadband
internet and telephony services. Liberty Global also serves over 10
million mobile subscribers and offers WiFi service across seven
million access points.
Liberty Global’s businesses are comprised of two stocks: the
Liberty Global Group (NASDAQ: LBTYA, LBTYB and LBTYK) for its
European operations, and the LiLAC Group (NASDAQ: LILA and LILAK,
OTC Link: LILAB), which consists of its operations in Latin America
and the Caribbean.
The Liberty Global Group operates in 12 European countries under
the consumer brands Virgin Media, Ziggo, Unitymedia, Telenet and
UPC. The LiLAC Group operates in over 20 countries in Latin America
and the Caribbean under the consumer brands VTR, Flow, Liberty, Más
Móvil and BTC. In addition, the LiLAC Group operates a subsea fiber
network throughout the region in over 30 markets.
About Vodafone Group
Vodafone is one of the world’s largest telecommunications
companies and provides a range of services including voice,
messaging, data and fixed communications. Vodafone has mobile
operations in 26 countries, partners with mobile networks in 49
more, and fixed broadband operations in 17 markets. As of 30
September 2016, Vodafone had 470 million mobile customers and 14
million fixed broadband customers. For more information, please
visit: www.vodafone.com.
Statement of Responsibility
Amounts presented in this release with respect to Liberty
Global, Ziggo and the Ziggo Sport premium sports channel service
are the responsibility of Liberty Global. The amounts presented in
this release with respect to Vodafone, Vodafone Netherlands and
Vodafone Thuis are the responsibility of Vodafone.
Important Notice
Certain information contained in this document constitutes
“forward-looking statements”, which can be identified by the use of
terms such as “may”, “will”, “should”, “expect”, “anticipate”,
“project”, “estimate”, “intend”, “continue”, “target” or “believe”
(or the negatives thereof) or other variations thereon or
comparable terminology, or by discussions of strategy, plans,
objectives, goals, future events or intentions. Such statements
express the intentions, opinions, or current expectations of the
parties with respect to possible future events and are based on
current plans, estimates and forecasts, which the parties have made
to the best of their respective knowledge, concerning, among other
things, the respective business, results of operations, financial
position, prospects, growth and strategies of Liberty Global and
Vodafone, statements regarding the transaction and the anticipated
consequences and benefits of the transaction, included but not
limited to benefits for consumers and with respect to the B2B
opportunity, as well as synergies, the future growth prospects of
VodafoneZiggo, and the intended future financing for VodafoneZiggo,
including the intended leverage. Due to various risks and
uncertainties, actual events or results or actual performance may
differ materially from those reflected or contemplated in such
forward-looking statements.
Such risks and uncertainties include, but are not limited to
risk involving the parties’ respective ability to realize expected
benefits associated with the transaction; the impact of legal or
other proceedings; and continued growth in the market for broadband
communications and mobile services and general economic conditions
in the relevant market(s).
Furthermore, a review of the reasons why actual results and
developments may differ materially from the expectations disclosed
or implied within forward-looking statements can be found:
- under “Forward-looking statements” and
“Principal risk factors and uncertainties” in the Vodafone Group
Plc’s annual report for the year ended March 31, 2016;
- under "Other Information –
Forward-Looking Statements" in Vodafone Group Plc's Half-Year
Financial Report for the six months ended September 30, 2016;
and
- in Liberty Global’s filings with the
U.S. Securities and Exchange Commission, including its most
recently filed Form 10-K and Forms 10-Q.
No assurances can be given that the forward-looking statements
in this announcement will be realized. As a result, recipients
should not rely on such forward-looking statements. Subject to
compliance with applicable law and regulations, the parties
undertake no obligation to update these forward-looking statements.
No representation or warranty is made as to the reasonableness of
such forward-looking statements. No statement in this document is
intended to be nor may be construed as a profit forecast and no
statement in this document should be interpreted to mean that the
earnings per share of Vodafone, as altered by VodafoneZiggo, will
necessarily match or exceed the historical or published earnings
per share of Vodafone or the relevant entities which form the basis
for VodafoneZiggo.
Ziggo – Segment OCF Definition and Reconciliation
Ziggo defines Segment Operating Cash Flow (“Segment OCF”) as
operating income before depreciation and amortization, share-based
compensation, related-party fees and allocations, provisions and
provision releases related to significant litigation and
impairment, restructuring and other operating items. Segment OCF is
a non-GAAP measure as contemplated by the U.S. Securities and
Exchange Commission's Regulation G. Segment OCF is the primary
measure used by Ziggo’s management to evaluate its performance.
Segment OCF is also a key factor that is used by Ziggo’s internal
decision makers to evaluate the effectiveness of its management for
purposes of annual and other incentive compensation plans. Segment
OCF should be viewed as a measure of operating performance that is
a supplement to, and not a substitute for, operating income, net
earnings or loss, cash flow from operating activities and other
U.S. GAAP measures of income or cash flows. A reconciliation of
Segment OCF to the most directly comparable GAAP financial measure
is presented below:
12 months ended September
30, 2016
in millions Segment OCF
€
1,341
Share-based compensation expense (9)
Related-party fees and allocations13
(210) Depreciation and amortization (926) Impairment, restructuring
and other operating items, net
(48) Operating
income
€
148
Vodafone Netherlands – EBITDA Definition and
Reconciliation
The description and reconciliation of Vodafone Netherlands’
EBITDA to its operating profit below is for informational purposes
only and not for the purpose of complying with any law, rule or
regulation including Regulation G under the U.S. securities
laws.
EBITDA for Vodafone Netherlands is defined as operating profit
excluding share in results of associates, depreciation and
amortisation, certain intercompany charges, gains/losses on the
disposal of fixed assets, impairment losses, restructuring costs,
other operating income and expense and significant items that are
not considered by management to be reflective of the underlying
performance of the Group. Adjusted operating profit excludes
non-operating income of associates, impairment losses, certain
intercompany charges, restructuring costs, amortisation of customer
bases and brand intangible assets, other operating income and
expense and other significant one-off items.
12 months ended September
30, 2016
in millions EBITDA
€
624
Underlying depreciation and amortisation (D&A) (463) D&A
adjustment for asset held for sale 270
Adjusted operating
profit 431
Intercompany charges14
(86) Other
(52)
Operating profit
€
293
1. Represents combined RGUs of Ziggo and Vodafone Netherlands
(as defined by each) as at September 30, 2016, excluding Vodafone
Thuis.
2. Following the receipt of conditional European Commission
clearance for the JV and in anticipation of the JV transaction
closing, new debt with net proceeds of €2.8 billion was issued in
September 2016 to recapitalise the business; these funds were put
into escrow pending the closure of the JV.
3. Ziggo amounts are prepared under United States Generally
Accepted Accounting Principles and Vodafone Netherlands amounts are
prepared under International Financial Reporting Standards as
issued by the International Accounting Standards Board.
4. The historical Ziggo amounts include Liberty Global‘s cable
operations in the Netherlands and the Ziggo Sport premium sports
channel that have been contributed to the JV. Please see the end of
this release for the definition of Segment OCF and related
reconciliation.
5. Vodafone Netherlands EBITDA, as customarily defined by
Vodafone, is stated after net charges of €54 million paid to other
Vodafone Group companies.
6. Represents incremental shareholder charges per the underlying
Framework Agreement for 2017. For more information regarding the
Framework Agreement, see footnote 9.
7. The €210 million of cost and capex run-rate savings are
stated before integration costs and include €180 million of
operating cost savings.
8. The majority of integration expenses are expected to be
incurred during the 2017-2019 timeframe.
9. Pursuant to the Framework Agreement, Liberty Global and
Vodafone will receive annual shareholder charges of approximately
€97 million and €114 million, respectively, in 2017. Vodafone will
therefore receive incremental charges of around €61 million, in
addition to the €54 million of net charges paid to other Group
operating companies during the LTM ended September 30, 2016, which
are captured within Vodafone Netherlands reported EBITDA.
Shareholder charges, which are generally expected to be accounted
for within the OCF or EBITDA of the JV and the JV owners, include
charges that will vary over time based on the scope and activity
levels of the services provided.
10. Ziggo’s €7.7 billion of net debt, which is subject to
post-closing adjustments, is calculated in accordance with the
underlying Contribution Agreement and includes derivative
obligations and other debt-like items.
11. Excludes debt-like items used in calculating the
equalisation payment from Vodafone to Liberty Global.
12. Vodafone will classify its interest in VodafoneZiggo as a
Joint Venture, which will be accounted for under the equity
method.
13. Starting in 2017, related-party fees and allocations will
largely be replaced by shareholder charges pursuant to the
Framework Agreement as mentioned in footnote 9.
14. Starting in 2017, intercompany charges will largely be
replaced by shareholder charges pursuant to the Framework Agreement
as mentioned in footnote 9.
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Vodafone GroupInvestor
RelationsTel: +44 7919 990 230orMedia
Relationswww.vodafone.com/media/contactorLiberty
GlobalInvestor RelationsOskar
Nooij +1 303 220 4218Christian Fangmann +49 221 84 62 5151John Rea
+1 303 220 4238Caspar Bos +31 88 717 4619orCorporate CommunicationsMatt Beake +44 20 8483
6428Rebecca Pike +44 20 8483 6216
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